Case Study – Mis-sold PPI

Mr Stephen Davey

In August 2005, Mrs Rachel Davey attended her bank in person and took out a loan for £5,001.00. She was also sold a payment protection insurance (PPI) policy for £1,368.36, plus interest of £318.84, a total of £1,687.20

Despite Mr Davey never being present, the loan was granted in the joint names of Mr Stephen Davey & Mrs Rachel Davey. Mrs Davey indicated that she did not wish to provide answers to the demands and needs questionnaire, but the bank arranged cover under its Payment Protection Plan – Life, Accident, Sickness and Critical Illness cover for Mrs Davey and Life, Accident, Sickness and Involuntary Unemployment cover for Mr Davey.

During the application process Mrs Davey was not asked any of the questions on the application form. Had she been asked these questions, she would have answered them truthfully.  At the time of the meeting it was implied by the sales advisor that if she did not take out PPI cover then the loan would not be granted. Mrs Davey was not advised of the cost of the policy. She was not told that the policy was optional, or provided with any other quote, nor was she told that she could seek an alternative policy elsewhere.

Mrs Davey was not asked any questions about her medical history, yet she was sold Sickness and Critical Illness cover – she is 80% disabled and suffers from a chronic heart condition which she has had since 1998. Such is the severity of her condition that she is under an eminent specialist.

Not only was Mrs Davey not asked any questions in relation to either her health or employment status, when she volunteered to sales personnel that she had not worked for 10 years due to her disability, she was told that it did not matter and proceeded to be sold Life, Accident, Sickness and Critical Illness cover.

With regards to Mr Davey, as he didn’t attend any appointment with the bank, no questions were asked to him directly. No questions were asked about his medical health, although Mrs Davey informed the sales personnel that he worked as an agency van driver, and so his working patterns were erratic and that he could be laid-off by the agency. Mrs Davey was told that this did not matter and that her husband would still be covered under the terms of the policy.

Mr Davey was duly sold Life, Accident, Sickness and Involuntary Unemployment cover. This policy was sold by the bank to a customer who had not attended its branch and was not interviewed. No medical questionnaire was sought and no advice was given.

During 2007, Mr Davey was indeed laid-off by the agency he’d worked for and he tried to claim under the policy. He was told that he was not covered by virtue of the fact that he worked for an agency.

It was clear that these policies were mis-sold to both Mr & Mrs Davey as it was apparent that they would have been excluded from claiming under the terms of its policy. So in 2008 ClearLaw wrote to their bank. When these points were raised via its complaints procedure they were rejected on the basis that there was no evidence to support the claim.

The case was then referred by ClearLaw to the Financial Ombudsman Service for adjudication on the basis that the policy had been mis-sold and mis-represented. The FOS carried out a preliminary investigation, following which the bank settled the claim and also awarded compensation for distress and inconvenience caused.